US Savings Bonds and Other Government Debt Today
    In reality US bonds have some of the lowest yields in the world. Many people would say that this is because they are the safest place to put your money. While this may have been true in the past this is not true today. The United States currently has the largest national debt as well as the largest trade deficit ever. This probably does not mean that they will default any time soon, but it should raise a few questions and prompt smart investors to seek out alternative investments.

    When you look at the fiscal situation in other countries it seems many are much more stable than the US economically. Countries such as Germany, Japan, Canada, India and China have large trade surpluses and very little national debt. Despite this, all of these countries' savings bonds yield more than US savings bonds.

    One more thing to consider about government debt in general is that is it not bought in a competitive market. Many countries' central banks establish policies where all of their surplus cash is used to buy a specific country's debt (most popularly the US). This allows the countries creating the debt to choose whatever interest rate they want and still get their debt financed by other countries' central banks.

The Private Debt Option
    The alternative to investing in government debt is investing in private companies' debt. Many companies have a perfect credit rating yet they still pay a significantly higher return on their debt. One may argue that a stable company can never be considered as low a risk as a stable country, but in this day in age this may not be true. When a company goes bankrupt the first people to get repaid are the ones holding its debt, then investors. When a country goes bankrupt is usually creates a government that claims to be "new" and therefore does not owe the debt of the "old" government, so the debt is never paid. On top of this, companies today are larger and more organized than ever before. These companies often do not use debt as a growth tool, but instead a means to maintain cash flow. This debt is just a convienance for the company and in no way means that it is leveraged or has any risk of default.

    Even when a private bond is risky investors often forget about the age old strategy of diversification. By simply buying 10 different company's bonds instead of 10 savings bonds one can guarantee that even if a few of their companies tank their return will still yield a higher return overall.

    With all the reasons not to buy US debt it is a wonder that investors still do it on such a big scale. Certainly the US government has been a huge benefactor with it's current debt and low interest rates.